By Tim Orellano, PHR, SHRM-CP
For those who watched the popular long running David Letterman late night show and enjoyed his famous and infamous Top Ten List, here is my version of Tim’s Top Ten list OFCCP Predictions for 2019.
This is a brief overview of the OFCCP initiatives and directives under OFCCP Director Craig Leen the most in twenty years. His changes are positive steps to work with employers and “no more fishing expeditions.”
Make no mistake OFCCP has not changed its mission to enforce nondiscrimination with more audits are coming. The directives are not law and are intended to give guidance to OFCCP compliance officers and gives insight in how the agency will handle audits and its focus. Details of these Directives can be found here: https://www.dol.gov/ofccp/regs/compliance/directives/dirindex.htm
As David Letterman would say, “Number Ten”
OFCCP Director Craig Leen made very clear publicly, in private meetings and during listening sessions with employers, lawyers and consultants he is taking steps to improve transparency, cooperation, and communication. First, OFCCP Implemented 45-day scheduling delay from the time a Corporate Scheduling Announcement Letter (CSAL) letter is issued to provide contractors more time to prepare for audit and participate in OFCCP compliance assistance events. Second, the scheduling methodology and expectations was published and third, the agency for the first time is publishing the audit list of employers. Contractor selection for compliance evaluations is now on line. Here is the link: https://www.dol.gov/ofccp/foia/foialibrary/index.html
Now What: There is no excuse not to prepare a “dry” audit prior to receiving the notice. The list is updated 2-3 times a year. You are required to prepare the AAP to be in compliance regardless of whether you are on the audit list.
Number 9. Rule of Law. OFCCP does not make law and must follow what the law says. Contractors need to know how to comply under the law in advance, particularly with compensation reviews.
Now What: Understand and stay up to date on the regulations and laws. Politely push back should the agency use creativity to interpret or make law. Ensure the AAP is technically correct. Ensure records to defend employment decisions are maintained, review any adverse impact analysis to determine the cause and prepare a proactive compensation analysis to uncover disparities.
Number 8. Leen put Deputy Director Marika Litras in charge of closing old audits over three years old. “Active Case Enforcement” (ACE) directive required deep-dive reviews in every audit, DIR 2019-01 returns to Active Case Management (ACM) that allows OFCCP to conduct more audits with quick, efficient analysis of applicants, hires, promotions and terminations data and analysis of the pay system to determine if there are any significant red flags with the goal to close the audit in 45 days.
NOW What: Ensure the AAP is prepared and audit ready every day. Ensure record keeping particularly aligned with the internet applicant rule and accurate dispositions are in place. 90% of all financial settlement findings are applicant/hiring violations due to poor record keeping to defend decisions. Are all job seekers properly dispositioned based on the stage they were in based on the Internet Applicant Rule? Have all job opening been listed with the state employment service with a few exceptions? Is there adverse impact? These are but a few areas to assess in the preparation of the AAP.
Number Seven: Compensation is a major focus area for OFCCP. DIR 2018-05 rescinded Directive 307 but kept some of the controversial features including pooled regressions, pay analysis groups (PAGs), analyzing multiple years of compensation data together with a focus on statistical data and empirical evidence. This means that OFCCP will evaluate both quantitative and qualitative information. OFCCP defines similarly-situated employees as those who would be expected to be paid the same based on job similarity (tasks performed, skills required, effort, responsibility, working conditions and complexity) and objective factors such as minimum qualifications or certifications. The agency will always conduct analysis by job group and will merge other job groups they believe are similar to make their regression tool work.
NOW WHAT: Conduct proactive attorney privileged pay equity analyses by an expert compensation analyst using the methodologies set forth in the Directive to mirror OFCCP’s expected analysis. Review job groups to group similarly situated jobs in sub groups that align with compensation, job functions and qualifications. Investigate unexplained differences in pay before the agency does it. OFCCP encourages contractors to develop Pay Analysis Groups (PAGs) which the agency will accept if “reasonable.” Be prepared to defend job groups, however, job groups are not generally the basis for a compensation system in the law and from my experience of an organization’s pay system. Stick to the position that compensation is tied to job titles not job groups.
Number Six: Director Leen believes in the spirit of compromise in working towards a solution to minimize time, costs and legal entanglements. DIR 2018-01 was issued to use Predetermination Notices (PDN). Should OFCCP allege discrimination findings, they will issue the PDN to work out a reasonable solution or remedy before sending a Notice of Violation (NOV). In the past, the NOV was issued up front. The PDN policy means OFCCP will issue a preliminary notice of findings before reaching any final conclusions. It affords the contractor 15 calendar days to respond and rebut the preliminary conclusions.
A new option in certain situations is Early Resolution Procedures under DIR 2019-02. Although some aspects of the new Early Resolution Procedures may be helpful, contractors need to consider the ramifications very carefully before agreeing to the new OFCCP’s Early Resolution Conciliation Agreement with Corporate-Wide Corrective Action (ERCA), especially for material violations alleging discrimination.
Now What: Employers should take advantage of the PDN to work towards a compromise to defend and explain how OFCCP’s conclusion may be in accurate. Always seek advice from a consultant and attorney during these negotiations. The new Early Resolution Procedures option could have unintended consequences because it will involve a Conciliation Agreement with Corporate-Wide Corrective Action (ERCA) and reporting for each establishment. Even though there is a five year audit moratorium for that particular establishment on future audits it does not provide a moratorium on other establishments.
Number Five: Directive 2019-03 establishes opinion letters and an enhanced help desk. It should provide contractors with useful compliance assistance and has a searchable help desk for questions and answers or to submit questions for an opinion about certain situations.
Now What: We will wait a see how this new initiative works.
Number Four: Mr. Leen expects there should be 100% compliance of an AAP, but knows many are not in compliance. A verification process to certify you have prepared your AAP is coming under Directive 2018-07. OFCCP historically has only audited approximately 2-3% of government contractor establishments each fiscal year (FY 2018 780 audits). OFCCP is working on using the current System for Award Management (SAM) data base to require all contractors to certify compliance under penalty of perjury. OFCCP’s goal is to implement some form of certification compliance, spot checking, or a universal request for annual submission of AAP’s from all contractors. Expect OFCCP to utilize the current SAM process for potential “compliance checks” as verification and if not verified increased likelihood of selection for a full audit. It is expected that an annual Summary AAP will be submitted to certify contractor compliance.
Now What: Prepare an AAP timely and be ready. The AAP certification process is coming and will require certification annually with the goal to submit a summary of the AAP.
Number Three: Religious Exemption: Directive 2018-03 instructs OFCCP staff to take into account recent U.S. Supreme Court decisions and White House Executive Orders that protect religious freedom. OFCCP staff are instructed not to pass judgment upon or presuppose the illegitimacy of religious beliefs and practices. Section 202 of E.O. 11246 does not apply to contractors that are religious corporations, associations, educational institutions, or society, with respect to the employment of individuals of a particular religion to perform work. The Supreme Court issued rulings in 2014, 2017, and 2018 that safeguard the broad freedoms and anti-discrimination protections that must be afforded religion-exercising organizations and individuals under the U.S. Constitution and federal law and to respect the right of religious people to practice their faith without fear of discrimination or retaliation by the federal government.
Now What: This does signal a change how the agency reviews religious accommodations during compliance evaluations. It may impact complaint investigations against certain employers which allege discrimination on the basis of religion or sexual orientation and gender identity. The DOL is expected to release proposed regulations, which would seek to codify the directive with specific rules, by the end of the year, followed by a required a public comment period. Stay tuned.
Number Two: Focus on Disability Rights-Protections and Veteran and Individuals with Disability (IWD). The agency is placing an emphasis on measuring the “effectiveness” of recruiting outreach and hiring of vets and IWD to see more progress that accommodates IWD in hiring because IWD unemployment is higher than any other category.
Now What: Conduct a thorough assessment of the “effectiveness” of outreach. No longer can you depend on just the listing of the opening with various sources – the “push out” of job openings. Now you must measure the “pull in” of applicants and hires. An assessment will be part of an audit submission and is required in the AAP to measure the results in applicants and hires.
Number One: Expect more audits. Director Craig Leen is increasing the number of audits from 780 in FY2018 to 3,500 in FY2019 to include 500 “Focused Reviews” . Focused Reviews will be on site at corporate headquarters and will target VEVRAA and Section 503 of the Rehabilitation Act. The directive’s description of Section 503 focused review, states” OFCCP would also seek to evaluate hiring and compensation data” in addition to its evaluation of accommodation practices to ensure individuals with disabilities are not being discriminated against in employment. The audit will include submission of the AAP.
The review will include interviews with managers and employees, hiring and compensation data, and the handling of accommodation requests. The Focused Review audit Scheduling Letter is similar to #7- #14 of the current Itemized Listing and includes a focus on ADA policies.
Now What: Watch for the audit list on the OFCCP website. Review the OFCCP launched the 503 Focused Review landing page. http://tinyurl.com/y3oenhhf
It provides a sample of the Focused Review Scheduling Letter, the website also includes a list of employer best practices and resources as well as a set of FAQs.
Can you provide the documentation to provide the information and data? Ensure accommodation practices are well documented especially evaluation of outreach and recruitment efforts, review of all employment practices, selection procedures for hires and promotions, compensation systems, and impact ratio results will ensure you are ready to meet the focused review challenge.
It will be a very busy year with 3,500 audits in 2019 and that is not counting those for last year’s scheduling list. OFCCP collected over $15 million in FY 2018. It will be higher this year. This cost does not include attorneys, consultants and loss of productivity and media disclosure.
While OFCCP is committed to transparency and employer collaboration, keep in mind they are an enforcement agency and your AAP can be an effective management tool or it can be a liability document and used against you that will cost the company time and money.
I hope my Top Ten list is informative and will help with the game changing initiatives. I encourage you to proactively take the Now What actions steps.
The Human Resources Team
[email protected] www.thehumanresourcesteam.com